Weekend Reads for Advisers: Luck, Work, and Happiness

Don’t fret. This is not the “self-help” edition of weekend reads, even though the headline might lead you to think so. It just so happens that luck versus skill, work (and it’s evil twin overwork), and investor happiness are topics tackled in three separate articles. Here, in case you missed them, are some interesting reads I came across over the past few weeks:

Risk Management/Probability/Mathematics

• “The Skin in the Game Heuristic for Protection against Tail Events” (Review of Behavioral Economics, PDF)

Is mathematical ability is inborn or learned. http://t.co/20upYwDVea good read

— Stephen Huppert (@stephenhuppert) January 17, 2014

Investing

• Why don’t women take more risks with their money? Because they make less than men, not because they’re biologically risk-averse. (The Atlantic)
• “Financial Advisers Changing Approaches for Women” (Reuters)
• “10 Money Lessons from Elderly Americans Who Have Seen It All” (The Motley Fool)
• “The skill set one needs to be a shrewd stock picker doesn’t involve complex math or defending your political party,” writes Eddie Elfenbein in “Investing Is a Bottom-Up Activity.” “Rather, it’s closer to that possessed by an investigative reporter or a private eye.” (Crossing Wall Street)
• “Why Economics Gets a Bad Rap” (The Week)
• What returns really make investors happy? “Investor Happiness” (SSRN)

Luck vs. Skill

excellent new memo from Howard Marks of Oaktree on the meaning of luck in investing http://t.co/n2aWFdKMO4 h/t @SantangelReview #WSJ

— Jason Zweig (@jasonzweigwsj) January 21, 2014

The Business of Wealth Management

• “Trend Spotting: New Wealth Management Competition from Unexpected Places” (InvestmentNews, registration may be required)

Work-Life (im)Balance

• A 2008 Harvard Business School survey of 1,000 professionals found that 94% worked 50 hours or more a week, and almost half worked in excess of 65 hours a week. “Overwork,” writes James Surowiecki in “The Cult of Overwork,” “has become a credential of prosperity.” (The New Yorker)

Elder Care / Retirement

• “A New Vocabulary for Retirement Planning” (Morningstar)
• Here is a sobering statistic: “Your odds of needing long-term care — care to help you with the activities of daily living — are seven out of 10.” Perhaps that wouldn’t seem so bad if it weren’t for the fact that most of us are woefully unprepared when it comes to paying for this type of care. According to “Long-Term Care of Your Personal Finances,” “there are three ways to pay for long-term care: By self-insuring (i.e., having no insurance, and paying all of your costs out of pocket); by having some sort of long-term care insurance coverage; and by relying on Medicaid, which requires that you exhaust almost all of your financial resources in order for the government to pay for your care. If your goal is to stay in your own home as long as possible and to maintain control over your care for as long as possible, consider purchasing some form of long-term care insurance. The more coverage you pay for, the more choices you will have.” (AAII Journal)

• Elder care is such an important topic that, for the first time, we have added a session to the agenda for our upcoming wealth management conference in California: “The Elder Care Imperative: What Client Decisions Now Will Make a Difference Later?” Bernard A. Krooks, founding partner Littman Krooks LLP, will discuss:
  • Financing long-term care: What are your options?
  • Preparing for tomorrow: What steps need to be taken now?
  • Planning elder law: What impact will the Affordable Care Act have?
• “What You Need to Know about Asset Transfers That Affect Medicaid’s 5-Year Lookback” (The Daily News)
• Wealth Management 2014 speaker Bill Reichenstein (and other experts) on saving money with smart social security withdrawals: “When Is the Right Time to Claim Social Security?” (The Wall Street Journal)
• In “That Retirement Time Bomb,” Linda Stern writes that “the baby boom generation is moving into retirement with something no other generation has had: huge tax liabilities” but that “you can cut your retirement taxes considerably with some careful pre- and post-retirement tax planning,” including “learning to love” the Roth IRA. (Reuters)

And Now For Something Completely Different

• A beautiful and wistful short film:

A Japanese student and an American journalist rescue an ancient farmhouse, changing their lives forever #aeonfilm http://t.co/EFAAuk6SGJ

— Aeon Magazine (@aeonmag) January 23, 2014

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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